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A blog discussing the macro forces shaping the global economy today and over the horizon.

Electric Vehicles Are Changing the World, and They’re Just Getting Started

Global interest in climate change – its effects on the environment and society more broadly – is at an all-time high. Countries around the world are increasingly acknowledging the shift that’s needed from a fossil fuel-driven economy to one that is sustainable, green and attempts to mitigate climate change.

Transportation is one area where this shift is especially necessary.

In the U.S., more than 90 percent of this sector depends on liquid fuels to function, and the lion’s share goes toward passenger road transport. China uses most of its liquid fuels to transport goods by road, and both Australia and New Zealand use a fair amount for aviation.

Non-liquid fuels such as electricity and natural gas will become increasingly important in the coming decades, a shift driven by concerns about air pollution, governmental regulations, social attitudes and rapid technological advancements.

The current model of road transportation is also becoming more problematic: Private cars powered by petrol and diesel contribute to air pollution, traffic congestion and noise.

A growing number of countries, including Austria, Denmark, Japan, Korea, the Netherlands, Spain and Portugal have established targets for electric vehicle sales. The UK and France want all new cars to be electric and produce zero emissions by 2040.

And, according to a recent report by BP, global oil demand will peak in the 2030s. This is primarily because of a 100-fold increase in sales of electric vehicles, capturing one-third of the car market.

Electric cars, planes and ships

Two countries are leading the way on electric cars and hybrids containing both an internal combustion engine and an electric motor.

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“China leads the world in electric vehicle sales, and its market continues to grow.”

One is Norway, where more than half of the new cars sold in 2017 fell into these categories. The other is China, which leads the world in electric vehicle sales, and its market continues to grow. In 2017, more than 600,000 electric vehicles were sold, 71 percent higher than 2016. Sales increased every month in 2017.

Electric cars will form an important part of China’s “war on pollution,” and it has aggressively adjusted its policies. For instance, by 2025, 20 percent of cars sold in the country must be electric vehicles. Volkswagen has responded by investing $10 billion in China to develop relevant technology and plans to manufacture 1.5 million electric vehicles by 2025.

It is not only vehicles that are going electric. Norway plans to make all short-haul flights of 90 minutes or less use electric planes. Avinor, the public operator of Norwegian airports, is planning to launch a tender to test a commercial short-haul route by an electric-powered plane in 2025. Zunum Aero, a start-up partly financed by Boeing, plans to have an electric plane available by 2022.

Airbus, Rolls Royce and Siemens are working together to develop a hybrid model, which could make its maiden flight as soon as 2020. These developments will reduce greenhouse gas emissions and also reduce noise levels by half.

There’s also been some progress in “electrifying” maritime transport. Passenger and cargo ships and ferries are developing hybrid and electric alternatives to reduce reliance on diesel and heavy fuels. YARA International, a Norwegian chemical company, is working with high-technology group Kongsberg to produce a zero-emissions electric ship that could be operational later this year.

All of these changes are exciting and necessary. But how will ordinary transport users benefit, and when? And what are the pitfalls?

Rapid shifts

A major Swiss bank, UBS, predicts that electric vehicles will account for 14 percent of global car sales by 2025. The figure was just 1 percent in 2017. That timeline may shift backwards because the technology involved is evolving and improving so quickly.

For instance, batteries are constantly getting cheaper and more efficient. The cost per kilowatt-hour for a battery used in a standard electric vehicle has come down from $1,000 in 2010 to $130 to $150 now. The distance you can travel with a single charge is steadily increasing: Some electric cars are driven for more than 1,000 kilometers before the battery needs to be charged.

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“Electric vehicles will account for 14 percent of global car sales by 2025.”

As battery technology improves, costs are dropping. It’s predicted that the total cost of owning an electric vehicle – including charging and maintenance – will fall below conventional car ownership in Europe in 2018. And Nissan estimates that electric vehicles and conventional cars will cost roughly the same by 2025.

This is all good news for drivers, who will be able to buy an environmentally friendly car at reasonable prices. It will also create entirely new markets.

Saudi Arabia is the oil capital of the world, raking in billions as it fuels traditional cars. Chile, which has by far the largest lithium deposits in the world, may become the new Saudi Arabia because lithium is essential to manufacture batteries of electric cars.

This article originally appeared on The Conversation and was republished with permission.

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Asit K. Biswas is Distinguished Visiting Professor at the Lee Kuan Yew School of Public Policy in Singapore and co-founder of the Third World Center for Water Management. He was a founder of the International Water Resources Association and World Water Council.

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Cecilia Tortajada is a Senior Research Fellow at the Lee Kuan Yew School of Public Policy, National University of Singapore.